Westville Holdings v. American Petroleum Partners, 84 Civ. 2763-CLB.

• Decision Date: 05 September 1984
• Docket Number: No. 84 Civ. 2763-CLB.,84 Civ. 2763-CLB.
• Citation: 592 F. Supp. 44
• Parties: WESTVILLE HOLDINGS, INC., Plaintiff, v. AMERICAN PETROLEUM PARTNERS, Donald Ginsberg and Jeffrey Weiss, Defendants.
• Court: U.S. District Court — Southern District of New York

592 F. Supp. 44

WESTVILLE HOLDINGS, INC., Plaintiff, v. AMERICAN PETROLEUM PARTNERS, Donald Ginsberg and Jeffrey Weiss, Defendants.

No. 84 Civ. 2763-CLB.

United States District Court, S.D. New York.

September 5, 1984.

Franklin B. Velie, Christy & Viener, New York City, for plaintiff.

Jeffrey C. Slade, Meister Leventhal & Slade, New York City, for defendants.

MEMORANDUM AND ORDER

BRIEANT, District Judge.

By motion, defendants seek to dismiss on jurisdictional grounds for want of complete diversity of citizenship. At issue is the citizenship of a limited partnership, in this case, American Petroleum Partners (hereinafter "American," or "the partnership").¹

The question of whether the citizenship of a limited partner in the same state as an adverse party destroys diversity when the partnership is sued was first considered by our Court of Appeals in Colonial Realty Corp. v. Bache & Co., 358 F.2d 178, 183 (2d Cir.), cert. denied, 385 U.S. 817, 87 S.Ct. 40, 17 L.Ed.2d 56 (1966). In Colonial Realty, federal claims arising under the securities acts were pleaded along with contract and tort claims. Diversity and federal question jurisdiction was relied upon. The late Judge Croake of this Court dismissed the federal claims as insufficient in law and stayed the state law claims pending arbitration. On appeal, a panel opinion held:

"The argument is that a limited partner of Bache & Co. is a citizen of Delaware and that diversity is thereby destroyed under the venerable doctrine of Strawbridge v. Curtiss, 3 Cranch 267, 2 L.Ed. 435 (1806). The district judge recognized that the citizenship of a limited partnership was not sufficiently made out for diversity purposes by alleging the state of its organization, even though state law permitted the partnership to sue or be sued in the firm name. Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 20 S.Ct. 690, 44 L.Ed. 842 (1900). But he correctly held that where, as here, there was diversity between the plaintiff and all the general partners of the defendant, identity of citizenship between the plaintiff and a limited partner was not fatal because under the applicable New York statute a limited partner `is not a proper party to proceedings by or against a partnership, except where the object is to enforce a limited partner's right against or liability to the partnership.' N.Y. Partnership Law § 115. In the absence of a claim of insolvency of the partnership citations and footnote omitted, a suit brought against a New York partnership must thus be considered to be against the general partners only and identity of citizenship between a limited partner and the plaintiff does not destroy diversity."

Movant concedes that the rule of Colonial Realty remains in force in this Circuit, but argues that its teaching was overruled by implication in the subsequent jurisprudence of a Supreme Court hostile to diversity jurisdiction. In Navarro Savings Assn. v. Lee, 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980), relied on by movant, that Court considered "whether the trustees of a Massachusetts business trust may invoke the diversity jurisdiction of the federal courts on the basis of their own citizenship rather than that of the trust's beneficial shareholders" (Id. at 458, 100 S.Ct. at 1780), and held that the respondents, who were not "naked trustees" or "mere conduits," could invoke diversity removal jurisdiction. Colonial Realty was not cited in Navarro, and the trustees seem to have possessed all of the powers and duties of general partners with regard to the property and business of a limited partnership.

In Elston Investment Ltd. v. David Altman Leasing Corp., 731 F.2d 436 (7th Cir. 1984) a panel of the Seventh Circuit held that the citizenship of all partners, general and limited, is "relevant" to a determination of the partnership's citizenship for diversity purposes. In so doing, it purported to rely on Navarro, and criticized Colonial Realty as resting on "only a short discussion and no supporting case cites." (Id. at 438)² The limited partnership in that case was organized under Illinois law. Similarly, in Trent Realty Association v. First Federal Savings and Loan Association, 657 F.2d 29, 32 (3d Cir.1981), the Third Circuit, relying on its own prior decision in Carlsberg Resources Corp. v. Cambria Savings & Loan Association, 554 F.2d 1254 (3d Cir.1977), held that citizenship of a limited partner destroys diversity if identical with that of an adverse party.

In Carlsberg Resources, reasoning from cases involving unincorporated associations, partnerships with only a...